Japan's shipping companies struggling to stay afloat

In a desperate bid to remain competitive, Japan’s three biggest shipping groups are to merge their container divisions.

The collapse in September of Korea's Hanjin Shipping, one of the world's largest shipping lines, "was testament to the financial pressures weighing on the sector", says the Lex column in the Financial Times. This week the pressure intensified as Japan's three biggest shipping groups, Nippon Yusen, Mitsui OSK Lines and Kawasaki Kisen, said they are to merge their container divisions.

This is the first major reorganisation among Japanese shippers since 1999, reports Nikkei Asian Review. The deal reflects "a growing sense that scale is one of the few remaining ways to survive in the foundering industry".

Nippon Yusen's president, Tadaaki Naito, said the groups faced bleak prospects on their own. "If we don't want the number of Japanese shipping companies to be zero, we need to create one strong, splendid company."

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But his plan is too optimistic, says David Fickling on Bloomberg. "A business is rarely more than the sum of its parts." The trio hope to save about 110bn ($1.05bn) a year from the deal, which represents about 6% of annual profits over the past five years. That "sounds modest until you consider the wafer-thin operating margins" of the trade.

Worse, it won't solve the fundamental problem of oversupply. "More supply will hit the water this year: the equivalent of the entire capacity of the Japanese joint venture," says Lex.

"It was perhaps only a matter of time before House of Fraser's ownership was thrown into question yet again," says Ben Marlow in The Daily Telegraph. The department store group has "spent a large part of the last three decades either being bought, sold, or haggled over". Since 2014 it has been owned by China's Sanpower, led by Yuan Yafei, "an energetic, cigar-chomping billionaire". Now it is under fire from US hedge funds who are busy hoovering up the company's debt. That's "usually the trigger for another bruising battle for control". There are "doubts about how deep its owners pockets are", says Marlow, but Yafei can still probably find the funds and "hold any predators at bay".

Sweden's Carnegie Investment Bank, which manages $17.2bn worth of assets, sold all its UK holdings ahead of the EU referendum, Henrik Drusebjerg, the bank's chief strategist tells Bloomberg. He remains concerned about the UK, considering it unlikely that Theresa May will be able to negotiate a good deal for Britain. "It will definitely end with a deal that is so bad they will either get an election about this new bad deal, or they will have to have a parliamentary election before that," he says. Indeed, it is "very possible that Britain will never reach Brexit", because "it will be obvious that the deal they will get will be really, really bad for the economy".

Shire CEO Flemming Ornskov is bullish about his company's prospects, despite an operating loss of $406m. "Everything is looking pretty good," he says. "I don't know what can go wrong." Sales of Xiidra, a drug to treat chronic dry eye, "should take some of the pressure off", says Hargreaves Lansdown, with potential sales "in excess of $2bn" a year. Jennifer Aniston is a fan. The actress, who says she is "addicted to eye drops", is heading up the company's new "Eyelove" ad campaign.

Ben Judge

Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website, scotsman.com, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.

Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.